The Significance of Worker Voice in Business and Society

Time and time again, experience has shown how important it is, to business and society, for individuals to speak up when they encounter problems or wrongdoing in the workplace. The scandal at WorldCom broke only after employees publicly blew the whistle on executives.[1] An Enron employee reported problems to the IRS in 1999, long before the firm’s failure in 2001 and, some speculate, early enough to have allowed the firm to survive if the problems had been addressed.[2] In the wake of scandal, Volkswagen offered internal immunity to employees who blew the whistle regarding cheating on emissions tests and requirements.[3] In an effort to weed out the wrongdoers and put the company on a path toward recovery, Siemens offered immunity for whistleblowing employees when scandal broke in connection with massive international bribery.[4]

Research has also demonstrated the importance of employee voice for individual employee well-being. Voice, whether it’s speaking up to one’s boss or having readily available ways to communicate within an organization, has been positively associated with numerous facets of psychological well-being, such as job satisfaction, perceived procedural justice, and organizational commitment.[5] Furthermore, employee satisfaction has been shown to increase when a greater number of ways to communicate are available.

In contrast, employees can suffer psychologically and physically when they feel unable to exercise their voice at work.[6] Despite the negative impact of employee silence for organizations and employees, there are often a number of serious barriers to speaking up in the workplace, including the risk of being fired or otherwise punished.[7]

The risk of termination is especially high in jurisdictions where employment-at-will is the legal norm. Employment-at-will gives employers and employees the right to terminate employment at any time, with or without reason (provided the reason is not illegal) without legal consequence.[8] In the United States, employment-at-will is the applicable legal standard when there is no employment contract, such as a collective bargaining agreement, executive contract, or other specific contract term granting employment for a specific period of time.[9] There are exceptions to the doctrine,[10] but most employment in the United States is employment-at-will.[11]

In addition, collective bargaining agreements, which provide some protection for employees, may be on the decline. The U.S. Supreme Court recently heard the case of Friedrichs v. California Teachers Association.[12] At issue was the mandatory payment of union dues. The court ultimately deadlocked on the issue, preserving the lower court ruling that permitted mandatory union dues.[13] Yet, some fear that the protection of unions will be vanish if the Supreme Court decides in a later case that assessment of mandatory union dues is unconstitutional. Twenty-six states[14] and the territory of Guam[15] already have “right-to-work” laws that bar compulsory union membership, and similar rules cover U.S. federal government employees.[16]

Furthermore, there have been a number of efforts to stifle voice through limits on whistleblowing in the workplace. First, the “ag-gag” laws are prime examples of business-backed legislation aimed at stifling voice. These laws, which have been passed in several states, generally make it a crime to film or gain unauthorized access to farming operations without the owner’s permission. In essence, this prevents employees from using undercover tactics to expose animal abuse and other misconduct in the food production industry. Although these laws are subject to challenge – and have been successfully challenged in some states – the threat of a lawsuit will deter employee voice in the industries to which these laws apply.

Second, businesses often use provisions in employment contracts to suppress employee speech. Mandatory arbitration clauses, for example, disadvantage whistleblowing by essentially eliminating the possibility of punitive damages, an important monetary incentive. These clauses, which are legally enforceable according to numerous Supreme Court decisions, are now facing pushback from Congress and several federal agencies, but efforts to combat the enforceability of such clauses have so far been unsuccessful. Other contractual tactics that employers have attempted include confidentiality agreements and agreements to forgo government whistleblower awards in exchange for severance pay or commission-fee eligibility. Although whistleblower protections are generally seen as trumping confidentiality agreements, even the threat of a lawsuit (for breach of agreement) may serve to stifle employee voice.

Finally, businesses suppress voice within their organizations by adopting suppressive corporate policies and embracing toxic corporate cultures. In the Wells Fargo cross-selling scandal, the bank’s sales program heavily pressured employees to sell customers as many financial products as possible. Many employees, desperate to meet high sales goals, resorted to creating fake accounts and signing up customers for unwanted products. When the issue became known to management, the bank responded by firing employees, holding ethics seminars, and encouraging the reporting of wrongdoing. But it failed to get at the root of the issue – the aggressive sales targets. The unethical behavior continued, and it took months after the scandal received mainstream media attention for Wells Fargo to revamp its compensation model. Moreover, the CEO of Wells Fargo failed to acknowledge any wrongdoing, instead shifting the blame to the bank’s staff. By maintaining a high-pressure incentive structure and pushing down blame for misconduct, top management probably created a culture of fear that encouraged employee silence within the organization.

In sum, employment-at-will norms, legislative policies such as ag-gag laws, and contractual provisions may deter the exercise of employee voice. But meaningful opportunities to engage in voice are important for the well-being of employees, the organization, and society at large. We therefore support laws that ensure legal protection for whistleblowers and encourage the repealing of laws that inhibit employees from feeling safe speaking up about their concerns in their workplaces.

Yet, even without legal reform, employers could immediately change practices that impede voice. Importantly, employees must trust, first, that management will not retaliate against the messenger of bad news, and second, that managers are open to getting feedback and will take reported concerns seriously. Top management should make clear that it wants to create a learning culture and that employees can raise concerns about the workplace without fear of negative consequences. For example, management can include in company materials summary statistics about workplace disputes and how they were resolved.

In addition, a member of senior management should monitor the company’s internal reporting system, and the reporting system should be structured to prevent anyone from intercepting or circumventing information and to allow the reporting employee the option of anonymity. This monitoring could be done through regular surveys that ask employees whether they feel safe speaking up in their unit of the organization. Management could also recognize employees for their courage in reporting issues by thanking and perhaps rewarding them.

Finally, managers should be trained on how to handle information received from employees. Our suggested corporate policies reflect our view that companies should adopt measures that foster employee investment and trust in the organization and that doing so will provide positive benefits to both the firm and society.

This post comes to us from Professor Cindy Schipani at the University of Michigan, Professor Frances Milliken at New York University, and Professor Terry Morehead Dworkin, scholar in residence at Seattle University School of Law. It is based on their recent article, “The Impact of Employment Law and Practices on Society: The Significance of Worker Voice,” available here.